Barclays Says Tech Firms to Lead Israel Return to U.S. Listings

Israeli tech firms will lead a comeback in U.S. listings this year as companies seek strong valuations, according to Barclays Plc.

Israeli technology companies will lead a comeback given the “strong valuations” they could fetch in U.S. markets, Len Rosen, chief executive officer of Barclays Israel, said in a phone interview.

Len Rosen

Source: Barclays Plc

The country’s tech industry led a U.S. IPO boom in 2014, capped off by Mobileye NV’s $1 billion share sale, but has slowed down in recent years as entrepreneurs chose to sell their businesses to larger firms and equity investors became more selective.

“Israel is a market that looks slow, until it’s not slow,” said Rosen, whose firm was the exclusive sell-side adviser in Orbotech Ltd.’s $3.4 billion sale to KLA-Tencor Corp. this week. “There was no real reason for the dearth of IPOs in the past few years.”

Finding Unicorns

Despite the drop in transactions on public markets, Israeli startups have attracted increasingly higher amounts from venture capital investors. Tech firms raised $5.1 billion in private funding rounds last year, 5 percent more than in 2016, according to Start-Up Nation Central, which tracks the industry.

IPO Drought

Israeli IPOs in US exchanges fell dramatically in the last three years

Source: Bloomberg

More reliance on private funds to grow their businesses could result in bigger deals once Israeli startups choose to list shares. There are at least three unicorns, or private companies valued over $1 billion, based in Israel, according to CB Insights, a New York research firm. That list doesn’t include Gett Inc., the Israel-based rival to Uber Technologies Inc. that’s seeking to raise new funds at a valuation above $2 billion.

Rosen didn’t specify how many firms are looking at IPOs this year. Nelson Griggs, Nasdaq Inc.’s executive vice president of listing services, said earlier this month that five Israeli companies are looking to list on his exchange in 2018.

That would equal the amount of new U.S. listings by Israeli companies in the past two years combined, according to data compiled by Bloomberg.

Rosen said President Donald Trump’s tax reform was an “extremely strong positive” for U.S. stocks, which already were boosted by strong economic data such as low unemployment and rising corporate profits. Trump could halt that momentum with his proposal to add tariffs on $50 billion worth of Chinese exports, which would create “a number of layers of uncertainty,” Rosen said.